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Nifty trading in a 350 point range; TVS Motor, ICICI Bank among 5 stocks that can return 8-13%

September 10
11:29 2019

Shabbir Kayyumi

Nifty is trading below the 20-DMA, 50-DMA as well as the 200-DMA, indicating a downtrend in all the time frames but a corrective bounce seems like a possibility. A long-legged doji candlestick pattern in weekly time frame rather suggests a bullish bias on a daily close above 10,967 which was the high of last week.

A Doji candlestick pattern on monthly time frame with long lower shadow also indicates positive momentum above last month’s high at 11,181 levels. Since the last 27 days, Nifty has been trading in a range of just 350 points. A Bollinger band squeeze can be seen on the charts which suggests volatility breakout can come above upper band which is placed around 11,171 levels.

Sell on rally strategy is advised, near-term strength in chart patterns on the lower time frame and oversold oscillators suggests the possibility of relief rally, whereas lower side support lies around 10,600-10,700 suggesting market range as 10,713-11,257 for the week.

Bank Nifty

As long as high of the previous week, 27,311 is not breached, it will trade lower towards its crucial support zone around 26,500-26,350. Also, the banking index is trading near strong support of 100-DMA (26,600) which suggests active buyers on the lower side and a possibility of price reversal cannot be ruled out.

Here are five stocks that can return 8-13 percent in near term:

Cadila Healthcare: Buy around Rs 235 | Target: Rs 265 | Stop Loss: Rs 215 | Upside: 13 percent

The stock has formed a bullish divergence on the weekly charts and broken out of the downwards sloping trend line recently. The daily RSI is over the 60 mark indicating positive momentum in the stock. MACD too shows positive crossover for the stock.

Above mentioned rationale suggest buying Cadila around Rs 235 with stop loss of Rs 215 and for the targets of Rs 265 levels.

ICICI Bank: Buy around Rs 390 | Target: Rs 430 | Stop Loss: Rs 369 | Upside: 10 percent

The daily chart of ICICI Bank reveals that demand is increasing and supply is diminishing. Formation of double bottom pattern at lower levels is displaying trend reversal and creates buying opportunity at current juncture.

As of now, sustainability of RSI above 9 DMA indicates surge on upside. Apart from this, declining histogram in MACD signals optimism, suggest upside move in the counter in coming sessions. We recommend buying ICICI Bank around Rs 390 with a stoploss of Rs 369 and target Rs 430.

TVS Motor Company: Buy around Rs 368 | Target: Rs 400 | Stop Loss: Rs 348 | Upside: 8.5 percent

The auto major appears to have formed a short term bottom near the lower base of double bottom on the weekly chart attracting buying interest. Formation of Bullish engulfing on weekly chart suggests strength. Buying momentum will accelerate above Rs 385 where pattern breakout is expected.

Sustainability above 20 DMA in coming sessions is implying further strength. Declining histogram of MACD is also suggesting upside momentum. Positional trader can create fresh long position around Rs 368 with a stop below Rs 348 on closing basis for an initial target of Rs 400.

Maruti Suzuki India: Buy around: Rs 6,000 | Target: Rs 6,500 | Stop Loss: Rs 5,750 | Upside: 8 percent

Maruti has formed a Hammer pattern on the weekly charts and closed above its 50-day moving average. The daily RSI has moved over the 50 mark indicating positive momentum creeping into the stock. The MACD too shows positive crossover for the stock.

With the next resistance near Rs 6,500-6,600 levels, we recommend a buy in Maruti around Rs 6,000 with a stoploss of Rs 5,750 and target of Rs 6,500.

Tata Steel: Buy around Rs 340 | Target: Rs 370 | Stop Loss: Rs 324 | Upside: 9%

Tata Steel has been forming bottom near Rs 340-345 levels where its key support is seen. Emergence of Dragon Fly Doji on weekly chart is giving the possibility of pullback at higher side in coming sessions. Sustainability of RSI above its 9 day EMA and daily MACD in uptrend along with bullish crossover thus supports bullish bias in the stock.

We suggest buying Tata Steel around Rs 340 with stop loss of Rs 324 and targets of Rs 370 levels.

(The author is Head of Technical & Derivative Research at Narnolia Financial Advisors Ltd)

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